Why Shares of The Habit Restaurants Inc. Tumbled on Thursday

By Markets Fool.com

Image Source: Habit.

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What: Shares of The Habit Restaurants slumped on Thursday following the burger chain's fourth-quarter earnings report. While the company posted rapid revenue growth driven by new restaurant openings, the numbers were mixed relative to analyst expectations. The stock closed down about 12% on Thursday.

So what: Habit reported quarterly revenue of $60.6 million, up 25% year over year, but just barely shy of the average analyst estimate. Comparable sales at company-owned restaurants increased by 3.3%, with the rest of the revenue increase coming from new restaurant openings. Habit ended 2015 with 137 company-owned restaurants, up from 109 at the end of 2014.

Habit reported non-GAAP net income of $0.05 per share, up from $0.02 during the prior-year period, and $0.01 better than analyst expectations. On a GAAP basis, EPS came in at $0.04, up from breakeven during the fourth quarter of 2014. Food and paper costs decreased as a percentage of revenue, helping to boost GAAP operating margin to 2.9%, up from 2.3%.

For 2016, Habit expects revenue in a range of $286 million to $290 million, with company-owned comparable sales expected to grow by 3%. Between 30 and 32 new company-owned stores are planned for the year, with four-to-six franchised locations also in the mix.

Now what: Shares of Habit have tumbled since the company went public in late 2014, and after the drop on Thursday, the stock is about 54% below its 52-week high. Comparable-sales growth is positive, but far from impressive, and with almost all of Habit's growth coming from new restaurants, investors' expectations are now far-more realistic compared to one year ago.

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HABT data by YCharts

Habit's fourth quarter wasn't bad, but sluggish comparable-sales growth, and guidance calling for that trend to continue into 2016, seem to be giving investors pause.

The article Why Shares of The Habit Restaurants Inc. Tumbled on Thursday originally appeared on Fool.com.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.